SY Manufacturers (SYM) is producing T-shirts in three colors: red, blue, and white. The monthly demand for each color is 2,000 units. Each shirt requires 0.40 pound of raw cotton that is imported from the Luft-Geshfet-Textile (LGT) Company in Brazil. The purchasing price per pound is $6.80 (paid only when the cotton arrives at SYM's facilities) and transportation cost by sea is $0.70 per pound. The traveling time from LGT’s facility in Brazil to the SYM facility in the United States is two weeks. The cost of placing a cotton order, by SYM, is $40 and the annual interest rate that SYM is facing is 12 percent of total cost per pound.
A. What is the optimal order quantity of cotton?
B. How frequently should the company order cotton?
C. How many orders will SYM place during the next year?
D. What is the total annual order cost?
E. What is the annual holding cost?